Cover, Featured
There is no doubt that the level of insecurity in the country is scaring away foreign investors, but some economists are worried that if serious and urgent actions are not taken to tackle the current insecurity, the country may be heading for depression this time around
By Anayo Ezugwu
OBVIOUSLY, no business can thrive without adequate security of lives and properties. Likewise, no economy can grow in the midst of insecurity anywhere in the world because those who are killed or displaced from conflict zones can no longer work productively. This is the vivid description of many parts of Nigeria, where people are displaced on a daily bases as a result of insecurity.
Today, the number of internally displaced persons in Nigeria is increasing on a daily bases without any end in sight. According to UNHCR, UN Refugee Agency, since violent attacks by Boko Haram started, over 2.7 million Nigerians have been displaced, including over 1.9 million internally displaced persons, IDPs, over 541,000 IDPs in Cameroon, Chad and Niger, and 240,000 refugees in the four countries. This situation has resulted in extreme pressures on those who have been displaced and on the federal and state governments that must provide humanitarian assistance.
With escalating farmers/herders crisis, banditry and kidnapping, these numbers are expected to increase in no distance time. The fear of many analysts and international donor agencies like the UNHCR is that displacement of more people would further reduce the production of goods for exports. They believe that it will also lead to reduction in foreign exchange earnings, importation and consequently constraining output, leading to a decline in employment and earnings.
This menace remains a threat to governance and economic growth of the country. Realnews investigations showed that in the areas where insecurity is prone in Nigeria, economic activities and variables have been lagging behind. The irony today is that in almost all parts of the country, there exist some levels of insecurity.
There are instances of ethnic conflicts in some part of the north, kidnapping in all parts, militancy and pipeline vandalism in Niger Delta, terrorism and religious extremism by Boko Haram in north east, agitations for self-determination by Indigenous People of Biafra, IPOB, in south east, herdsmen disturbances, ritual killings in southwest and east and other political and economic disturbances.
For instance, in the wake of Boko Haram insurgency in northeast, many companies, including telecom companies relocated from Borno and Yobe to northwest states. Companies withdrew their representatives and shutdown operations as the situation worsened in the region. Telecom masts were destroyed by the sects, making communications difficult in the region.
Likewise, unemployment have soared in the region and states internally generated revenues dropped, with many governors from the region relying on federal government allocations to pay salaries and execute some projects. The story is the same in Niger Delta area where militants’ attacks on oil installations and pipeline vandalism forced many oil companies to relocate there head offices to Lagos and Port Harcourt. The country has been unable to meet its oil production target, unemployment has skyrocketed, oil exports nosedived, foreign exchange dropped and the cost of doing business increased.
Farmers have also abandoned their farmlands, leading to high rate of wastes and losses. Today, it’s not just farmers in northeast that abandoned their farms, those in northwest, north central, southwest and southeast have joined them as a result of famers/herdsmen crises, kidnapping and banditry. These unrelenting attacks on farms have not helped matters, as it has done more harm than good.
Food insecurity in the country is imminent as warned by the Central bank of Nigeria, CBN. The apex bank on Tuesday, July 23 after the Monetary Policy Committee, MPC meeting advised the federal government to urgently address security challenges in various parts of Nigeria, especially in the agrarian communities to increase food production and sustain inflation that has been on a downward trajectory in recent times.
Given these huge economic costs of insecurity, experts and indeed many Nigerians believe that the federal government must tackle insecurity to enable the economy grow. They alluded to the fact that insecurity is fuelling lack of investors’ confidence in the Nigerian economy. Austin Nweze, lecturer, Pan-Atlantic University, Lagos, and economic analyst, said: “There is no way an economy can do well where there is insecurity.”
According to him, investors go to where there is conducive political and economic system, a peaceful environment so that businesses can flow. “There is two way to it, one of the indicators of a failed state is high crime rate, kidnapping and general insecurity. And the same things impact on the economy. I will give you an example; there are so many businesses in Maiduguri in northeast that have been shut down because of insecurity in the state. Today, there is high unemployment rate in the region.
“So wherever there is crisis, it impacts on the economy. People cannot trade and consumption is low. Even when people have money, there are few goods and services that are available. And consumption is a major part of the economy. If the economy is working, communities will produce and consume what they produce and it has a high impact on the economy because consumption is affected. People cannot move their goods and services from one point to another because of insecurity,” he said.
Nweze warned that if farmers fail to return to farm in this farming season, inflation many go up again. “Insecurity leads to high inflation because people are making high margins from whatever produce they are able to move to crisis areas,” he said.
He lamented that the country might go back to recession if government fails to tackle insecurity. “Yes not just recession, but the country might go into depression because there is no productivity. For instance, herdsmen attacks on farmers are still ongoing. Farmers cannot farm. Even the little they are able to farm, cows will eat them up and herdsmen displace them in the process.
“There is hunger in the land and if there is hunger it will affect every aspect of the economy. Nigerians should be getting ready for depression and like I always say, if you are buying foods buy enough that can last you for six months,” he warned.
Another economic analyst, Adori Ochai, alluded to the fact that insecurity scares investors away. “The impact is huge. First of all, insecurity scare away investors, no businessman will invest his money in an insecure environment. And when there is no investment, there will be no productivity, unemployment will be high. At the end, we may be having poverty in the land.
“But if the investors are not coming in, the government will have enough capital to carryout projects. When you establish a business, you are widening the tax net for government to get more revenue through tax. But because of insecurity government revenue will reduce.
“In the rural areas where people cannot go to farm because of insecurity and a result we will be moving closer to food insecurity because there is low productivity,” he said.
Ochai disagreed with those warning the country over eminent recession. He said food insecurity will not push Nigeria back to recession. According to him, the only thing that will take the nation back to recession is if there is sharp decline in oil price. “As long as the insecurity is not from the Niger Delta, there might not be fear of recession. As long as we are able to meet our OPEC requirement, I don’t see recession coming any time soon.”
On his part, Omoragbon Osaza, economic analyst, said: “Insecurity has negative impact on the economy mostly on food insecurity because the most important issues are still going on. Issues like kidnapping, farmers/herders crisis are still there and many people are afraid of going into agriculture. You know agriculture is one the policies of this government, but the problem now is that if you go into farming and at the end of the day you have people who are coming to destroy all your efforts.
“It also has impact on foreign investment. When investors hear this news of killings and kidnappings, you know we used to have this kidnapping only in northeast, but it is now down to us in the south. And people will be thinking that Nigeria is not safe for business,” he said.
Osaza urged the government to tackle insecurity in the country. He said the government should decentralise its effort to end insecurity by making everybody to be involved in the fight.
But the presidency on Wednesday, August 7, said Nigeria’s economy is not in trouble. Garba Shehu presidential spokesman, said the economy had grown under President Muhammadu Buhari. “In keeping with historical trends, there is less economic activity during the electoral cycle. For instance, the economy grew by 2.35 percent in second quarter of 2015 and 3.96 percent in first quarter of 2015 as compared to 5.94 percent in fourth quarter of 2014.
“While foreign direct investment can help, it is not the only source of investment in the economy. There is also domestic investment, which is either undertaken by the government or by the private sector.
“It is also noteworthy that capital importation into Nigeria grew by 21.6 percent in the first quarter of 2019 as compared to the last quarter of 2018. Indeed, foreign portfolio investment (which is still foreign investment) was $7.14 billion in the first quarter of the year. A look at business pages in newspapers shows that there is a lot of business activity going on in the country,” he said.
Be that as it may, insecurity in Nigeria has reached an alarming proportion. Lives are lost on daily basis, population depleted, businesses in comatose, investments are nose-diving, multinationals closing shops and leaving the country, unemployment soaring and the populace in fears. Clearly, unless the Buhari-led administration does something urgently, governance and economic growth of the nation may collapse.
– Aug. 9, 2019 @ 19:35 GMT |
Tags: Insecurity and Nigeria’s boisterous economy
